Coal sector needs to be privatised: Plan Commission

PTIJun 19, 2006, 08.00pm IST

NEW DELHI: The Planning Commission has stressed on the need for privatising the coal sector to boost investment in the area.

"Taking a long-term view of energy production there is a strong case for de-nationalising coal so that private sector investment can come into this crucial area. If petroleum, which is much scarcer than coal is open to private sector, there is no reason why coal should also not be opened up...." the Commission observed in the draft approach paper to the 11th Plan.

It said the total coal demand would shoot upto 670 million tonnes in 2011-12 from the current 432 MT while the power sector would require around 500 MT by 2011-12. Coal India Limited is curently aiming to increasing production to an unprecedented 60 per cent during the 11th plan period inclusive of the recently approved emergency coal production plan.

"But realistically speaking, this level of increase in output, together with the necessary rail infrastructure to move the additional coal production, may be difficult to achieve by CIL alone," the plan pael said.

However, pending a consensus on the issue of de-nationalising the coal sector, every effort should be made to expand coal production through the route of captive mines and large coal users, especially in the power sector, can be given been available proven coal blocks for developing captive mines.

Preliminary estimates suggest that in addition to coking coal the country may need to import 40 to 50 million tonnes of superior grade thermal coal by the end of the 11th Plan.

Coal-fired plants in Southern and Western coasts can be competitive using imported coal and the nation's electricity requirements justified such imports, the Planning Commission said in the draft approach paper.

However, this would require necessary port handling capacity and coast-based power generation capacity of around 12,000 to 15,000 megawatts to absorb the thermal coal imports.

Coal pricing and marketing also needs to be modernised. The e-auction route which has been opened recently has worked well and has helped to nudge consumers towards more rational pricing.

"This window can be expanded over the 11th Plan. The method of pricing coal also needs to be rationalised by shifting to Gross Calorific Value instead of Useful Heat Value and by having more finely graded price brands," the Commission inferred.